The scandal of alleged oil price-fixing

The whistleblower gave Halfon a statement in which he said the price of oil was being deliberately distorted: ‘I trade the oil market on a daily basis and every day the price is manipulated,’ he said. ‘There is ample oil in the system to satisfy demand at the moment. Profiteering seems to be the only objective.’

The scandal of alleged price-fixing by British oil companies has turned the spotlight on the bizarre way in which petrol prices for much of the world are set by a few people sat in a London office for 30 minutes.

Britain’s Shell and BP, along with Norway’s Statoil, are at the centre of a massive EC investigation after officials raided their offices in the capital last week.

All of the firms are co-operating with the investigation but they face public outrage if they are proved to have manipulated the wholesale price of oil.

It is believed the investigation will go back to 2002, when oil was just $20 a barrel, less than a fifth its price today. In that time, the cost of petrol has soared 80 per cent to 136.24p a litre. Estimates for the cost of any market manipulation in Britain have been as high as £300billion, or £10,000 for every consumer.

As well as BP and Shell, raids were also carried out at the Canary Wharf offices of a company called Platts –part of American business services giant McGraw-Hill – which is the key agent in setting the benchmark oil prices using information provided by the oil companies.

This is the reference price for 60 per cent of all the crude oil traded worldwide and deals worth an astonishing £1.65trillion a year. Along with taxes, it is the wholesale price of oil that mainly determines the price of petrol at the pumps.

The select group at Platts gathers for about half an hour at 4pm each day to assess the day’s trading in oil. During that time, oil firms, trading houses and banks offer ‘ask’ and ‘bid’ quotes for oil.

Platts staff use this information and, crucially, their own ‘editorial judgement’, to assess what the price of oil should be.

Platts’ system dominates the market even though it has considerable flaws.

It is only a snapshot of activity, it does not assess all the oil trades made and companies can choose whether to take part or not.Platts can also exclude companies and has done so if they are deemed to have broken its arcane rules, a process called ‘boxing’.

The EC investigation was sparked by an obscure Hungarian biofuel company called Pannonia Ethanol, which complained its attempts to join the Platts system were being thwarted.

Eric Sievers, chief executive of Ethanol Europe, which owns Pannonia Ethanol, said: ‘Platts’ behaviour was very strange and certainly unprofessional and so we finally went to the Commission. They listened and asked a lot of questions.’

But while Pannonia sparked the investigation, it was not the the first industry insider to become suspicious of its own market.

Last year, Tory MP Robert Halfon, who has long campaigned for a reduction in petrol prices and has now written to the Serious Fraud Office urging it to begin its own investigation, was contacted by an oil trader who wanted to turn whistleblower.

The whistleblower gave Halfon a statement in which he said the price of oil was being deliberately distorted: ‘I trade the oil market on a daily basis and every day the price is manipulated,’ he said. ‘There is ample oil in the system to satisfy demand at the moment. Profiteering seems to be the only objective.’

Halfon said the whistleblower then contacted the authorities, but has heard nothing from them since.

He added: ‘If these current allegations are proved then there should be multi-billion pound fines on the guilty parties and that money should go back to motorists.

‘If it turns out that price-fixing is widespread, the Government would be within their rights to impose a windfall tax on oil firms.’

Halfon’s mystery whistleblower later won support from an unlikely source – French oil company Total. It was careful to describe the agencies that set the price of oil as ‘conscientious and professional’.

But it also said: ‘We encounter, several times a year, estimates of market prices on key indices that are out of line with our experience of the day and with the available information on which the price formation is based.’

Earlier this year the Office of Fair Trading said that the UK market for petrol was competitive and that there was ‘no credible evidence’ of wrongdoing.

Halfon said: ‘The OFT did a half-hearted, weak inquiry just to keep MPs quiet. Now let’s see if the Serious Fraud Office and the police can do any better.’

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singapore love: Rumor on the street is the Shell Vito project is over a year behind schedule, AND Shell plans to double down and award Whale to the same contractors in the coming weeks.
Must be some serious love going on between the Singaporeans and Shell decision makers....

Bonus Group: To uscitizen,
BRAZIL:
'PS - Shell is investing 2 billion a year into Brazil and already paying off'. Assuming $2Bn (you did not quote currency), that would just about cover Shell's share of the costs of replicants, operating expenses and of course managers' BONUSES!
$2Bn would represent approximately 10% of Shell's income in 2018.
https://reports.shell.com/annual-report/2018/consolidated-financial-statements/statement-of-cash-flows.php
FPSO unit cost: our initial case ($91bn total capex) assumed a cost of $2.5 billion for each of 13 FPSO units. However, our research shows a wide range of possibilities for this cost depending on the vessel configuration; plus the fact that Brazilian shipyards should get better at building them so the cost could reduce over time. Also the project might choose to lease rather than buy the FPSOs outright, which could improve economics for the consortium depending on the lease terms.
http://openoil.net/wp/wp-content/uploads/2016/12/OO_br_Libra_narrative_1.0_161104.pdf

uscitizen: Bonus group, Contradict myself - lol. Poor guy - like I said do your own research - tell us what you find, you will look like the irrational uneducated poster you are. PS - Shell is investing 2 billion a year into Brazil and already paying off. Do you ever look anything up?

Bonus Group: To US Citizen. Thank you for your post of September 9th 2019 20:12. Congratulations on also being an avid reader of this blog. You are correct in my post of June 26th 2019 23:05 I did say that '..Shell had a ‘fire sale’ of a plethora of BG ‘dross’ assets in order to raise $30Bn to disguise the amount by which they had overpaid for BG Group.' More correctly, Shell had a ‘fire sale’ including a plethora of BG ‘dross’ assets in order to raise $30Bn to disguise the amount by which they had overpaid for BG Group. This does not detract from the fact that Shell did have a 'fire sale' in order to raise $30Bn. By my estimation Shell over paid for BG Group by about 30%. The Christmas boxes were very large, but the presents were very small. You contradict yourself when you say that you will not do my homework for me, but then tell me that the split of the $30Bn assets sold was 80:20 Shell:BG. Is that correct? If so, thank you that just goes to show how worthless those BG assets were, but then that is what you can expect from a Cappuccino and Belgian chocolate lifestyle company. Any comments about what the Brazil Asset are up to these days?

uscitizen: To Bonus Group - the large percentage of assets sold by Shell were non BG assets. I will not do your homework for you, but the split is 80/20. A great example of why you do not take what this sites protagonists post as good information. But go ahead, say I am wrong and also posting garbage, do your research and tell me the number of BG asset sales vs the 30 billion Shell raised thru asset sales.

John Donovan: MESSAGE FROM JOHN FOR THE ATTENTION OF BOGUS GROUP. I have received the information you kindly sent and have replied by encrypted email.

Bill Campbell Prelude Comment: I might write in more detail but I find it rather ironic that it was this website that was telling the world 6 or so years ago that this installation did not have risk levels as low as claimed and one of the principal risk drivers was the compact nature of a hazardous substances plant with not enough space to swing a cat in. Unless you are not aware I wrote to Shell Australia at the time giving them data from 8 existing or planned onshore LNG plants which varied from 80 to 100 hectares or on average 20 to 22 times the footprint of Prelude, could they tell me as a stakeholder with shares in the Company how they arrived at their ridiculously low number but can guess I assume that a reasonable explanatory reply was not forthcoming, as sure as eggs are eggs if this plant is currently having problems or if it has problems or major accident events in future it will be due to the force fitting a complex plant, with risk levels much above which they have published, on a postage stamp of a footprint.
God willing they will never live to regret their fraudulent overly optimistic claims, risk is based on reality not wishful thinking.
Bill

Thanks. Problem is that it's behind a paywall and despite it being a great publication for the oil industry, none of us retired folk wants to invest in a subscription.

FURTHER REPLY FROM JOHN

I have received the further Prelude information you have kindly provided and have replied by encripted email.

Bonus Group: Further to Bogus Group's post yesterday. I am absolutely appalled that a Senior Executive of Royal Dutch Shell plc should spout so much nonsense concerning the Prelude installation. The statement is redolent of Malcolm Brinded and his 'Touch F*ck All' policy, which led to the deaths of Keith Moncrieff and Sean McCue on Brent Bravo on 11th September 2003. What is boring is the continuous misleading spin and blather from the top of this company and their lackadaisical approach to safety. 'Chronic Unease' is a well known expression in the Oil and Gas Industry, and that state of mind is far from boring or routine. In fact nothing is either boring or routine in Oil and Gas operations. Rob Jager moved last year to the post of VP Prelude after spending thirteen years as Country Chair and VP for Shell New Zealand/Shell Taranaki, after Shell announced the sale of its New Zealand interests in March 2018. Jager clearly previously has spent too much time being 'laid back' in the fantasy land of Lord of the Rings, marvelling at New Zealand's scenery and wondering who will be entertaining him for his next luxury seafood dinner accompanied by a glass of chilled expensive New Zealand Sauvignon Blanc.

Bogus Group: PLEASE SEE REPLY FROM JOHN WHICH FOLLOWS THE COMMENT FROM BOGUS GROUP
More on Prelude article in Upstream.

I’m stunned by what can only be described as idiotic statements. Nothing like the utopia of self-aggrandisement without verification. What is Jagers’ level of technical and operational capabilities? I recall similar rhetoric from BG Group charlatans, with the “best in class” mentality and use of the most overstated expression ever to be used outside the education sector, all aimed at pleasing their taskmasters.
Ramp-up of Prelude and what Jager hopes will be decades of “uneventful” and “boring” operation.
“This will be a state where little or nothing happens. We have few if any alarms, no surprises and where things are running like clock work and we are effectively in autopilot,” he said.
“We will know when we have succeeded in this ambition because Prelude will be recognised as the most boring asset in Shell global portfolio our people will refer to it as the safest and most desirable place to work, and when the rest of the industry is knocking on our door to find out how we have achieved such a best in class outcome, especially for a facility as complex and unique as Prelude.”

REPLY FROM JOHN

Hello, I would be grateful if you could send me a copy of the article via [email protected] using an anonymous email address. I would pass it on to retired Shell EP experts for their assessment.

FG names Shell, Eni executives in $1bn bribery case – The Punch08 May 2019 11:43Google’Femi Asu with agency report
Royal Dutch Shell Plc and Eni SpA face additional corruption allegations over a Nigerian oil deal, after the Federal Government said in a London lawsuit that it believed a handful of executives, including Chief Executive …

FG names Shell, Eni executives in $1bn bribery case08 May 2019 08:09Punch Newspapers’Femi Asu with agency report
Royal Dutch Shell Plc and Eni SpA face additional corruption allegations over a Nigerian oil deal, after the Federal Government said in a London lawsuit that it believed a handful of executives, including Chief Executive …

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